Reserves up, Indian rupee stronger thanks to central bank actions

22/04/2014 07:50 AST

[MUMBAI] When Raghuram Rajan took charge of India's central bank in September, the rupee was near its weakest on record and foreign reserves were at a three-year low. In the seven months since, the currency has been a world beater and holdings have climbed back above US$300 billion.

India's defences against financial market volatility are improving, according to Barclays plc, as developing nations brace for an increase in US interest rates flagged by the Federal Reserve.

Mr Rajan, who spurred US dollar inflows by offering discount currency swaps to banks and reining in inflation, said on April 11 that Asia's third-largest economy is now prepared for potential fallout should the Fed raise rates in the coming year.

"It's largely Governor Rajan's actions by way of timely market intervention and garnering of funds that stabilised the markets," U R Bhat, at the India unit of UK-based asset manager Dalton Strategic Partnership, said on April 16. "The higher reserves are now providing the firepower to tackle any volatility and keep the currency stable."


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